Ideologically, it is expected that the government provides basic social amenities and infrastructure for its populace largely through taxes paid by citizens. In reality, taxes paid by citizens are not sufficient to ensure that these social amenities and infrastructures are provided for. It is no news that there is shortage of funding available for essential services and infrastructural development by the government in Nigeria and in almost every country in the world thereby creating a gap which NGOs and companies through their Corporate Social Responsibilities (CSR) have attempted to fill. The inability of the government to meet up with the increasing responsibility to provide and maintain infrastructure in the country and the need to regulate the contribution of private individuals to infrastructural development has led to the concept of Public-Private Partnership (PPP).
This article discusses the concept of Public-Private Partnership (PPP), clauses, examples, advantages, disadvantages and recommendations for its success.
A public- private partnership can be described as a co-operation between the public and the private sector, in which the government and the private sector jointly carry out a project on the basis of an agreed division of tasks and risks, each party retaining its own identity and responsibilities. It is a way for governments to mobilise funds and deliver what they would not have otherwise been able to provide i.e. the public infrastructure and services that the citizens require.
The underlying principle of PPPs is that, the public sector needs to be responsible for the delivery of a particular service, it does not have to be involved in the actual provision the service or for undertaking the investment themselves. In this way, all actors of a public private partnership can concentrate on doing their part of the agreement. PPP agreements are aimed at optimising the input of knowledge and resources from both sectors.
Major public infrastructural developments have always been undertaken by the private sector under contract. The major difference between a normal contract from the government and a private sector and public – private partnerships is the fact that the private sector can be regarded as a full-fledged contributor.
Essential features of PPP are:
For a standard Public-private Partnership, transparency over projects funded and accountability for delivery needs to be explicitly defined, and the clauses spelled out in publicly available contracts. Thus, essential clauses in a PPP agreement are:
In Nigeria, The Infrastructure Concession Regulatory Commission (ICRC) established under the Infrastructure Concession Regulatory Commission Act 2005 is saddled with the responsibility of addressing Nigeria’s physical infrastructure deficit which hampers economic development. The body has been active in the development of PPP and part of their activities is the establishment of Nigerian Public Private Partnership Network in collaboration with Lagos state.
A number of projects have been executed and are being executed in Nigeria through PPP, some of which are:
It must be noted that there is anticipation for a larger number of projects to be executed through PPPs as a result of the newly signed Executive Order 007 of 2018 by President Muhammed Buhari on the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme Order.
The benefits of PPP cannot be over emphasised. They provide better infrastructure solutions than an initiative that is wholly public or wholly private giving each participant the opportunity to do what it does best. They also result in faster project completions and reduced delays on infrastructure projects by including time-to-completion as a measure of performance and therefore of profit.
A public-private partnership’s return on investment (ROI) might be greater than projects with traditional, all-private or all-government fulfilment. Innovative design and financing approaches become available when the two entities work together. Risks are fully appraised early on to determine project feasibility. In this sense, the private partner can serve as a check against unrealistic government promises or expectations. The operational and project execution risks are transferred from the government to the private participant, which usually has more experience in cost containment.
Public-private partnerships may include early completion bonuses that further increase efficiency. They can sometimes reduce change order costs as well. By increasing the efficiency of the government’s investment, it allows government funds to be redirected to other important socio-economic areas. The greater efficiency of PPP reduces government budgets and budget deficits.
High-quality standards are better obtained and maintained throughout the life cycle of the project. Public-private partnerships that reduce costs potentially can lead to lower taxes.
It is noteworthy that PPPs are not without drawbacks as every public-private partnership involves risks for the private participant, who reasonably expects to be compensated for accepting those risks. This can increase government costs.
When there are only a limited number of private entities that have the capability to complete a project, such as with a major construction, the limited number of private participants that are big enough to take these tasks on might limit the competitiveness required for cost-effective partnering. Profits of the projects can vary depending on the assumed risk, the level of competition, and the complexity and scope of the project.
If the expertise in the partnership lies heavily on the private side, the government is at an inherent disadvantage. For example, it might be unable to accurately assess the proposed costs.
In conclusion, there should be promotion and increment in PPP participation in Nigeria as the benefits are immense in comparison with the disadvantages. It is, however, important that the government or the public sector and the private sectors embrace transparency and accountability while working together to ensure that the basic needs of the populace being the targeted beneficiaries of these partnerships are considerably met.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Should you have any questions relating to this article – please do not hesitate to reach:
Leave A Reply